Portfolio Manager Max Gaines Needs to Develop an Investment Portfolio

question 20

Essay

Portfolio manager Max Gaines needs to develop an investment portfolio for his conservative clients.His task is to determine the proportion of the portfolio to invest in each of the five mutual funds listed below so that the portfolio provides the best return possible with a minimum risk.Formulate the maximin linear program. $$\begin{array} { c | r r r r } & { \text { Annual Returns (Planning Scenarios) } } \\\text { Mutual Fund } & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { International Stock } & 22.37 & 26.73 & 6.46 & - 3.19 \\\text { Large-Cap Blend } & 14.88 & 18.61 & 10.52 & 5.25 \\\text { Mid-Cap Blend } & 19.45 & 18.04 & 5.91 & - 1.94 \\\text { Small-Cap Blend } & 13.79 & 11.33 & - 2.07 & 6.85 \\\text { Intermediate Bond } & 7.29 & 8.05 & 9.18 & 3.92\end{array}$$